Flagship West Midlands manufacturer JCB is to axe about 650 jobs, nearly a tenth of its British workforce, it was announced – as bosses were meeting the Queen at Buckingham Palace.

The Staffordshire-based construction equipment manufacturer said it had suffered a “rapid decline” in business as a result of the downturn in the building industry caused by the global credit crunch.

It said it planned to cut 500 manufacturing jobs at its UK factories. It is thought a further 150 managerial jobs could also go.

News of the cuts broke as senior JCB executives gathered at the Palace to collect two Queen’s Awards for Enterprise.

They were among bosses of 14 West Midlands companies who were due to meet the Queen, the Duke of Edinburgh and other members of the royal family.

The job losses will hit all of JCB’s UK factories – eight in Staffordshire, two in Wrexham and one in Derbyshire.

The 500 manufacturing job cuts account for eight per cent of JCB’s UK total workforce, but it added that a number of office-based staff positions are also facing the axe.

The company, based at Rocester, near Uttoxeter, said details of the further redundancies were still being hammered out.

JCB revealed that orders had plummeted, leaving its forecast production schedule for the rest of the year down by 20 per cent.

The privately-owned firm warned last month that sales growth was under pressure as the credit crunch slowed construction demand this year.Matthew Taylor, group chief executive, said the job cuts were “regrettable but absolutely necessary”.

He added: “Our products are used mostly in the construction sector, which has been badly affected by the global credit crisis and rising raw material costs.

“Many JCB dealers around the world are experiencing lower sales rates because of reduced customer activity, mainly in the house building and commercial property sectors, and this has a direct impact on our machine build programme.

“These job losses are regrettable but absolutely necessary to ensure that JCB remains competitive and well-positioned to benefit from any market upturn.”

The group is seeing some continued growth in emerging markets, such as Russia, Brazil and the Middle East, but it said this is not enough to offset the declines elsewhere and does not expect to see a recovery until late 2009 at the earliest.

Paul Kenny, general secretary of the GMB union, said: “This is extremely bad news and we will be seeking urgent talks with the company to see what can be done to mitigate the worst aspects of the announcement.

“We had a feeling earlier this year that a recession was on the way and that construction and associated sectors would be the first to be hit.”

JCB is the world’s third largest manufacturer of construction equipment, with 18 plants across the world, employing more than 9,000 staff in total.

The group, founded by Joseph Cyril Bamford in 1945, claimed a 12 per cent share of the world construction equipment market last year, manufacturing more than 300 different products for the construction and agricultural markets.

It had boosted its UK workforce by more than 44 per cent in the two years to last December.

Today JCB is headed by Joseph Cyril’s son, Sir Anthony Bamford who, together with his family, has a fortune estimated at £1.2 billion.

He was ranked fourth among the Midlands’ wealthiest individuals in the latest Birmingham Post Rich List.